Matthieu van der Heijden

University of Twente
Enschede, The Netherlands

Case: Spare part inventory optimization for the Chinook helicopter

Part III
Consider the same situation as in Part II: The Royal
Netherlands Air Force owns 11 Chinooks. Actually, these
chinooks are stationed at three bases within the Netherlands:
7 Chinooks at Base 1, 3 Chinooks at Base 2, and 1 Chinook at
Base3. The nine key modules are: Vertical Gyro, AFCS
Computer, Air Data Computer, Multifunction Display, VHF
Receiver/Transmitter, Auxiliary Power Unit, FWD Rotor Blade,
Pilot Cockpit Windshield, Wheel Assembly (see spreadsheet
“Chinook MultiEchelon for Part III students.xlsx” for the
data). You have to complete this spreadsheet with the
appropriate formulas first (but you know from Part II which
input should result in which output). Your challenge is to set
spare part inventory levels for all nine modules at all
locations (three bases plus the depot), such that a weighted
average supply availability at the three bases of at least 0.99
is attained at minimum spare part investment costs. For the optimization, you may use the marginal
approach. That is, you do not have to consider reallocation of the parts over the various locations in the
supply chain during each iteration (flush-out).

Question 3: Formal optimization

a) Implement the marginal approach heuristic to optimize spare part inventory levels to satisfy the goal
as stated above. Clearly describe the steps in the heuristic, and explain the logic.
b) Which spare part inventory levels do you select for each module at each location? What is the
inventory investment? Wat is the supply availability per location as well as its weighted average over
all locations?

Question 4: Sensitivity analysis - KPIs

In Question 3, you will probably have found a solution where the weighted average supply availability
over the three bases satisfies the target, but where also the supply availability differs between bases.
How does your answer to Question 3 change if we require a supply availability of at least 0.99 at each of
the three bases?

Question 5: Sensitivity analysis – scenarios

Now return to your METRIC model from Question 3. Perform a sensitivity analysis, where you may select
one of the three scenarios below:

1
 Matthieu van der Heijden
University of Twente
Enschede, The Netherlands

a) Suppose that you are able to influence repair lead times, for example by expanding repair capacity or
by prioritizing certain repair jobs. Then which repair lead time would you prefer to reduce? How
much are you willing to pay extra for each repair job? Assume a yearly holding cost rate of 0.20, and
consider lead time reduction scenarios of 25%, 50%, and 90%.
b) Suppose that you are able to reduce the failure rate of one of the modules by 50%. For which
module is this most profitable, and why? What will the impact be on the total spare part inventory
investment in the network?
c) In the future, it may be feasible to use additive manufacturing (AM) for the FWD rotor blade. In that
case, rotor blades can be quickly manufactured on demand, and thus no spare parts are needed
anymore. The price of an AM rotor blade will be x% higher than a conventional rotor blade. The
failure rate of an AM rotor blade will by y% better than a conventionally manufactured rotor blade.
For which combinations of x and y would it be profitable to apply AM? Here, x and y may have any
value, positive or negative. For example, the failure behavior of an AM rotor blade may be lower
because the rotor blade is manufactured in one piece, but it may be worse because of inferior
material properties. Assume that (i) repair of a conventional rotor blade costs 25% of the new value,
so $75,000, (ii) AM manufactured rotor blades cannot be repaired.

Note: You should think about your own logic to find a good solution. You can try to find some fancy Excel
add-in that acts at a black box and solves the problem for you, but you won’t learn anything from that.
You will also not be able to answer all questions above.